How Belfor Grew to Be #1 in Disaster Recovery

Belfor is one of those big, successful companies you never hear much about. The privately held, global disaster-recovery giant has over $1 billion in sales and grew from one office in Dearborn, Mich., opened in the early 1980s, to over 400 locations around the world. Company CEO Sheldon Yellen points to two key aspects at Belfor that have allowed the company to grow and thrive -- an intensely people-focused corporate culture, and savvy in buying and successfully integrating similar businesses. Yellen appears on CBS's Undercover Boss this Sunday at 9 p.m. ET/PT.*

Some of Belfor's acquired companies are in its main disaster-repair niche, while others provide related services, such as kitchen-vent-cleaning firm Hoodz and heating-duct cleaner Ductz. The related companies are a frequent source of referrals for Belfor's core disaster-mitigation business. Last year, CEO Sheldon Yellen reports the company acquired 11 businesses in all, and two more deals are in process and expected to close in early 2011.

But here's the unusual thing: 97 percent of the all the business owners who headed those acquisitions are still with the company.

"All the entrepreneurs who sold us their businesses have stayed on our payroll all this time," he says, "running their local operations. We've had private-equity firms look at Belfor to try to buy our company, and they can't believe it."

Secrets of successful acquisitions
Now, anyone who covers mergers and acquisitions can tell you that most entrepreneurs beat a path out of the big company that bought them out within about 18 months of signing their deal. They tend to chafe at being a cog in a big-corporate wheel, and usually head off to start another small company. Or even worse, the acquisition just doesn't take and the new company has to be spun back out of the corporation -- think AOL (AOL) and Time Warner (TWX).

How has Belfor managed to keep nearly all the brains behind its acquired companies on board? Yellen says it's the Belfor's unique corporate culture, which promotes heavily from within and highly values ideas from the field. Headquarters has been kept lean, with only 50 managers overseeing the company's staff of 6,000, so Belfor hasn't grown the layers of middle management that often strangle a company as it grows and drive frustrated entrepreneurs out the door.

It's also the mindset with which Belfor approaches acquisitions. Yellen says he thinks in terms of buying people -- their expertise and knowledge of their local market -- rather than purchasing physical assets.

"What makes good companies to acquire? Not the numbers," he says. "I sit in front of the guy [selling the company] and get inside his heart and allow him inside mine. If there's a problem there, there's no deal. You can never make a good deal with a bad person -- I don't care how cheap something may appear to be."

Yellen is so passionate about Belfor's culture that he recently put it to the ultimate test. He visited locations in disguise for the CBS-TV show Undercover Boss, to see for himself whether the company was valuing its people. What he saw for the most part made him proud.

"I have to brag on our people," he says, "because they're the best. Our culture really permeates the whole organization, and continues to bring in quality people."

Carol Tice is a longtime business reporter whose work has appeared in Entrepreneur, The Seattle Times, and Nation's Restaurant News, among others. Online sites she's written for include Allbusiness.com and Yahoo!Hotjobs. She blogs about the business of writing at Make a Living Writing.